Members Absent:

Guests Present:

Meeting Agenda

APPROVAL OF THE AGENDA

APPROVAL OF THE MINUTES 5-14-98

UNIVERSITY FOUNDATION

RECOMMENDATIONS REGARDING THE ALLOCATION OF NEW EXPENSE

APPROVAL OF THE AGENDA

Don Farish brought the meeting to order at 8:10 AM and asked for a motion
to approve the Agenda A motion was made by Dennis Harris. A second was obtained
from Bill Barnier. The Agenda was approved unanimously.

APPROVAL OF THE MINUTES 5-14-98

Farish then asked to a motion to approve the minutes of 5-14-98. A motion
was made by Les Alder. A second was obtained from Dennis Harris. Aaron Pava
asked that the Minutes be amended to reflect the fact that some campuses were "unaware
of or unconcerned about the CMS project". Members agreed unanimously to
amend the minutes in this regard. The Minutes, as amended, were then approved
unanimously.

UNIVERSITY FOUNDATION

Schlereth briefed the Committee on a recent decision by the President regarding
the University Foundation. He noted that, based on feedback from the Academic
Senate, the President had decided to follow historical practice and maintain
the grants and contract function in the same auxiliary corporation (Foundation)
as the University endowment. In this fashion, the issue of overhead expense
associated with the Endowment would be addressed as it always had been, thus
eliminating this item from the University-Wide unfunded list.

Katharyn Crabbe
then introduced the following motion:

"PBAC recommends to the President that the University develop and issue
an RFP for the management of the Endowment with the intent of determining whether
it is possible to realize savings by outsourcing the task or some portion of
the task, e.g. the trust accounts. Any savings realized through the RFP process
should be returned to the PBAC for reallocation".

A second to Crabbe's
motion was obtained from Parker. Discussion then ensued, with questions being
raised regarding the impact of outsourcing all our permanent employees and
whether the RFP was to deal with all aspects of endowment management or just
certain portions.

Garlin then moved to table the motion. A second was obtained
from Harris. The motion to table Crabbe's motion passed with 8 Yes votes and
4 No votes.

Crabbe then introduced the following motion:

"PBAC recommends to the President that he instruct the appropriate Cabinet
Officers to develop a plan for phasing in Endowment support for the costs associated
with managing the Endowment. A second to Crabbe's motion was obtained from
Garlin. Discussion then ensued. Garlin asked that the words "during 1998-1999" be
inserted following the phrase "develop a plan". By unanimous consent,
the Members agreed to Garlin's request. Adler asked that the words "University" be
substituted for the words "that he instruct the appropriate Cabinet Officers
to". By unanimous consent, Members agreed to Adler's request. Crabbe's
motion now read as follows:

"PBAC recommends to the President that he instruct the University
to develop a plan in 1998-1999 for phasing in Endowment support for the costs
associated with managing the Endowment."

Discussion on the motion continued
with the following points or questions raised:

Was the Plan intended to move the campus toward a policy of assessing gift's
to support endowment overhead?

The President had agreed that it was appropriate to assess the endowment
itself for overhead costs once the endowment reached approximately $100,000,000.

Other methods of financing endowment could potentially exist, including
decapitalization.

Sue Parker then moved to amend Crabbe's motion to specify "that no more
than 50% of Grants and Contracts indirect be applied to Endowment costs." The
motion was seconded by Garlin. After discussion, the motion was withdrawn.

A
vote was then taken on the original motion, which passed unanimously.

Parker
then moved that the PBAC recommend to the President that the current levels
of indirect cost recovery returned to Academic Affairs from grants and contracts
be maintained. A second to Parker's motion was obtained from Garlin. Discussion
then ensued on the motion. Harris argued that the motion was not necessary
given the motion just approved by the PBAC. Barnier argued against the motion,
noting that it did not account for normal cycles of grant and contract activity.
Harris then called the question on Parker's motion. By unanimous consent, Members
agreed to vote on the Parker motion. A vote was taken; the motion failed with
2 Votes in support and 14 against.

POTENTIAL METHOD TO ALLOCATE NEW UNIVERSITY-WIDE EXPENSE

Assumes Presidential Scholars program will be funded, at least on a temporary
basis, via prior year adjustment revenue.

New Revenues and Expenses

Item

Amount

Note

Projected New Revenue - Enrollment Growth

$1,073,000

Projected New Marginal Revenue - Reimbursements

$308,000

TOTAL

$1,381,000

Less:

Land Acquisition

$-60,000

Collaborative Management Systems

$-236,000

*

Direct Instruction

$-450,000

Disability Resources

$-120,000

Risk Management

$- 75,000

President's Operating Expense

$- 50,000

Executive Compensation

$- 20,000

Scholarship Coordinator

$-45,000

AVAILABLE FOR ALLOCATION

$325,000

Distribution of Expense

Item

Percentage

Amount

Executive Office

2.18%

$7,085

Academic Affairs

86.22%

$280,215

Student Affairs

2.14%

$6,955

Administration/Finance

9.46%

$30,745

TOTAL

$325,000

* Actual costs for Collaborative Management Systems in fiscal year 98-99 are
uncertain but are estimated between $200,000 and $250,000.

Since CMS and Land Acquisition were determined to be appropriate items to include
in the un-funded University-Wide items list, Members moved to a discussion of
direct instruction.

Harris argued that direct instruction was not a University-Wide
item but rather a clear responsibility of Academic Affairs. Crabbe argued that
the list of University-Wide items was really a list of University priorities
and not a list of un-funded University-Wide items. In this sense, including
direct instruction was appropriate. According to Crabbe, the VPBAC developed
its list for inclusion in University-Wide based upon the inclusion of other
division-specific projects.

Harris disagreed with the Crabbe, pointing out that
the marginal cost formula adopted by the PBAC incorporated direct instruction
needs associated with enrollment growth. He noted that if the item was removed
from the list and the marginal cost formula applied, Academic Affairs would
still receive sufficient resources to handle direct instruction needs associated
with 180 new full-time students.

Melinda Barnard agreed with Harris, suggesting
that to do otherwise would confuse the concept of revenue distribution via
the marginal cost formula for all items other than those clearly seen as University-Wide.

Aaron
Pava recommended that only CMS and Land Acquisition should be taken from the
top since these items were CSU-mandated or campus-wide items. Pava noted that
he believed all remaining resources should be allocated to the Divisions and
via the marginal cost formula.

Barnard agreed with Pava but recommended adding
Executive Compensation since this item was also mandated by the Trustees.

PBAC
staff then illustrated how Pava and Barnard's thoughts would translate into
an allocation model reflected below:

New Revenues and Expenses

Item

Amount

Note

Projected New Revenue - Enrollment Growth

$1,073,000

Projected New Marginal Revenue - Reimbursements

$308,000

TOTAL

$1,381,000

Less:

Land Acquisition

$-60,000

Collaborative Management Systems

$-236,000

*

Executive Compensation

$- 20,000

AVAILABLE FOR ALLOCATION

$1,065,000

Distribution of Expense

Item

Percentage

Amount

Executive Office

2.18%

$23,217

Academic Affairs

86.22%

$918,243

Student Affairs

2.14%

$22,791

Administration/Finance

9.46%

$100,749

TOTAL

$1,065,000

Parker then moved that the above allocation model be recommended to the President.
A second was obtained from Pava.

Barnier asked that the items taken "off-the-top" be
reflected in the University-Wide budget category. However, he noted that this
would not be possible for Executive Compensation.

A vote was then taken on the motion which passed unanimously.

GOOD OF THE ORDER

Several comments were made for the Good of the Order. Barnard noted that she
was aware that there were some concerns about the structure of the PBAC. She
urged that the structure not be changed. She also recommended that the Cabinet,
PBAC, CRC and VPBAC devote the Fall, 1998, semester to a discussion of what items
should be viewed as new University-Wide items.

Pava thanked the PBAC for their
openness to student input and noted that he felt his concerns were heard and
addressed by the PBAC membership.

Crabbe complimented the Members for their
work and thanked Pava, Harris and Barnard in particular for urging the PBAC
to make recommendations based on sound principles.

Garlin acknowledged the leadership
of Farish and Schlereth as co-chairs and expressed, on behalf of the Members,
the fact that Farish's presence on the PBAC would be missed.

ADJOURNMENT

Farish then thanked the Members for their hard work over the course of the
year andadjourned the meeting at 9:50 AM.